FEMASYS INC

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or the SEC, on March 28, 2024. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements and reflect our beliefs and opinions on the relevant subject. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or the SEC, on March 27, 2025. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements and reflect our beliefs and opinions on the relevant subject. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Previous wording

We are a leading biomedical company focused on addressing significant unmet needs for women worldwide with a broad portfolio of in-office, accessible, and innovative therapeutic and diagnostic solutions, including a lead revolutionary product candidate and FDA-cleared, and Canadian and European Union approved products. Our mission is to provide women with superior minimally-invasive, non-surgical product technologies, accessible in the office, improving patient care and overall health economics focused on servicing the reproductive health needs for those seeking solutions for infertility issues (FemaSeed and FemVue) or permanent birth control (FemBloc). We are a woman-founded and led company with an expansive, internally created intellectual property portfolio with over 200 patents globally, in-house chemistry, manufacturing, and controls (CMC) and device manufacturing capabilities and proven ability to develop and commercialize products. Our suite of products and product candidate address what we believe are multi-billion dollar global market segments in which there has been little advancement for many years, helping women avoid pharmaceutical solutions, implants and surgery that can be expensive and expose women to harm.

Current wording

We are a leading biomedical innovator, addressing significant unmet needs in women’s health worldwide, with a broad patent-protected portfolio of disruptive, accessible, in-office therapeutic and diagnostic products. The Company is a U.S. manufacturer that has received global regulatory approvals for its product portfolio worldwide, and they are currently being commercialized in the U.S. and key international markets. FemaSeed® Intratubal Insemination, a groundbreaking infertility treatment delivering sperm directly to the site of conception, is U.S. FDA-cleared and approved in Europe, United Kingdom (UK), Canada and Israel. A peer-reviewed publication of positive data from its pivotal clinical trial of FemaSeed demonstrated effectiveness and safety with high satisfaction from both patients and practitioners. FemVue®, a companion diagnostic for fallopian tube assessment via ultrasound, is U.S. FDA-cleared and approved in Europe, UK, Canada, Japan and Israel. FemCerv®, an endocervical tissue sampler for cervical cancer diagnosis, is U.S. FDA-cleared and approved in Europe, UK, Canada and Israel. FemBloc® permanent birth control is a revolutionary first-in-class non-surgical solution, that involves minimally-invasive placement of a patented delivery system for precise delivery of our proprietary synthetic tissue adhesive (blended polymer) into both fallopian tubes simultaneously. Over time, the blended polymer fully degrades and produces nonfunctional scar tissue to permanently block the fallopian tubes in the safest most natural approach. This is in stark contrast to centuries-old surgical sterilization with reported risks that include infection, minor or major bleeding, injury to nearby organs, anesthesia-related events, and even death. Along with the various surgical risks, some patients may not qualify as good surgical candidates due to obesity or medical comorbidities. The FemBloc non-surgical approach has the potential to offer a safer, more accessible in-office alternative with fewer risks, contraindications, and substantially lower cost. A peer-reviewed publication of positive data from its initial clinical trials of FemBloc has demonstrated compelling effectiveness and five-year safety with high satisfaction from both patients and practitioners. In March 2025, we announced CE mark certification under EU MDR as the first regulatory approval in the world for the FemBloc delivery system for non-surgical female permanent birth control. For the FemBloc blended polymer, an integral part of the FemBloc permanent birth control, we have successfully completed an expedited G12 Special MDR Audit for Class III devices and the Notified Body has recommended for CE mark approval pending the final stages of EMA review, with potential approval expected mid-2025. In March 2025, we announced strategic distribution partnerships for FemBloc in Spain. The pivotal clinical trial (clinicaltrials.gov: NCT05977751) is now enrolling participants for U.S. approval. F…

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Previous wording

On October 30, 2024, we announced a partnership with Boston IVF, a prominent network of fertility centers, to offer FemaSeed.

Current wording

On March 19, 2025, we announced a partnership with CNY Fertility, a national conglomerate of 11 fertility centers, to offer FemaSeed.

Previous wording

Cost of sales increased by $104,653 or 121.4%, to $190,839 for the three months ended September 30, 2024 from $86,186 for the three months ended September 30, 2023. The increase is attributed to increased sales, specifically of FemaSeed.

Current wording

Cost of sales increased by $28,734 or 32.5%, to $117,266 for the three months ended March 31, 2025, from $88,532 for the three months ended March 31, 2024, and is attributed to increased sales.

Previous wording

Other income (expense), net decreased by $373,621, or 442.9%, to $289,262 of expense for the three months ended September 30, 2024 from $84,359 of income for the three months ended September 30, 2023. The decrease relates to an increase in interest expense and non-cash discount amortization related to the convertible notes payable, partially offset by an increase in interest income.

Current wording

Other (expense) income, net increased by $303,552, or 221.8%, to $440,420 for the three months ended March 31, 2025 from $136,868 for the three months ended March 31, 2024. The increase relates to reduced interest income and increased non-cash discount amortization related to the convertible notes payable.

Previous wording

Since our inception through September 30, 2024, our operations have been financed primarily by net proceeds from the sale of our common stock and convertible preferred stock, indebtedness and, to a lesser extent, product revenue. As of September 30, 2024, we had $7,611,210 of cash and cash equivalents and an accumulated deficit of $122,074,573.

Current wording

Since our inception through March 31, 2025, our operations have been financed primarily by net proceeds from the sale of our common stock and convertible preferred stock, indebtedness and, to a lesser extent, product revenue. As of March 31, 2025, we had $3,820,208 of cash and cash equivalents and an accumulated deficit of $133,095,096.

Previous wording

On July 1, 2022, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (the “Sales Agent”) and filed a related prospectus establishing an “at-the-market” facility, pursuant to which we may offer and sell shares of our common stock from time to time through the Sales Agent. In October 2023, the Sales Agent was authorized to sell shares of common stock for an aggregate price up to $16.7 million pursuant to the prospectus. As of September 30, 2024, approximately 3.9 million shares of common stock have been sold for aggregate proceeds of approximately $8.7 million under the Equity Distribution Agreement pursuant to the prospectus. As of September 30, 2024, the amount we are authorized to sell is subject to baby-shelf limitations. In October 2024, the Company sold 665,669 shares under this facility, resulting in gross cash proceeds of $900,317.

Current wording

In July 2022, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (the “Sales Agent”) and filed a related prospectus establishing an “at-the-market” facility, pursuant to which we may offer and sell shares of our common stock from time to time through the Sales Agent. As of October 2023, the Sales Agent was authorized to sell shares of common stock for an aggregate price up to $16.7 million pursuant to the prospectus. As of March 31, 2025, approximately 8.3 million shares of common stock have been sold to date for aggregate proceeds of approximately $15.1 million. As of March 31, 2025, the amount we are authorized to sell is subject to baby-shelf limitations. As of March 31, 2025, the available amount pursuant to the prospectus was $1.6 million.

Previous wording

In November 2023, we entered into a securities purchase agreement with certain accredited investors pursuant to which we sold (i) senior unsecured convertible notes in an aggregate principal amount of $6,850,000, convertible into shares of common stock at a conversion price of $1.18 per share, (ii) Series A Warrants to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.18 per share, and (iii) Series B Warrants to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.475 per share (collectively, the “November Private Placement”). Net proceeds from the November Private Placement were $6.3 million. If exercised for cash, the warrants issued in the November Private Placement could result in proceeds of up to an additional $15.4 million.

Current wording

In November 2023, we entered into a securities purchase agreement with certain accredited investors pursuant to which we sold (i) senior unsecured convertible notes in an aggregate principal amount of $6,850,000, convertible into shares of common stock at a conversion price of $1.18 per share, (ii) Series A Warrants to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.18 per share, and (iii) Series B Warrants to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.475 per share (collectively, the “November 2023 Financing”). Net proceeds from the November 2023 Financing were $6.3 million. The Series B Warrants expired in November 2024 unexercised. If exercised for cash, the Series A Warrants issued in the November 2023 Financing could result in proceeds up to an additional $6.8 million. The Series A Warrants expire in November 2028.

Previous wording

Based on our current operating plan, our current cash and cash equivalents is sufficient into July 2025. However, it is not sufficient to fund our ongoing operations for twelve months from the date of these financial statements and we will need to obtain additional financing to fund our ongoing operations. Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate. As a result of our current limited financial liquidity, we have concluded that substantial doubt exists about our ability to continue as a going concern.

Current wording

Based on our current operating plan, our current cash and cash equivalents and anticipated revenues from product sales are expected to be sufficient to fund our ongoing operations into early third quarter of 2025. However, it is not sufficient to fund our ongoing operations for twelve months from the date of these financial statements and we will need to obtain additional financing to fund our ongoing operations. Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate. As a result of our current limited financial liquidity, we have concluded that substantial doubt exists about our ability to continue as a going concern.

Previous wording

Our cash and cash equivalents as of September 30, 2024 will not be sufficient to fund our product candidate FemBloc through regulatory approval, and we anticipate needing to raise additional capital to complete the development and commercialization of our product candidate. However, we can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds will be available to us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us. This risk may increase if economic and market conditions deteriorate. If we are unable to obtain additional financing when needed, we may need to terminate, significantly modify, or delay the development of our product candidate, or we may need to obtain funds through collaborations or otherwise on terms that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. If we are unable to raise adequate additional capital as and when required in the future, we could be forced to cease development activities and terminate our operations, and you could experience a complete loss of your investment.

Current wording

Our cash and cash equivalents as of March 31, 2025 will not be sufficient to sustain our operations, including funding our product candidate, FemBloc through regulatory approval, and we anticipate needing to raise additional capital to complete the development and commercialization of our product candidate. However, we can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds will be available to us, that such additional financing will be sufficient to meet our needs or be on terms acceptable to us. This risk may increase if economic and market conditions deteriorate. If we are unable to obtain additional financing when needed, we may need to terminate, significantly modify, or delay the development of our product candidate, or we may need to obtain funds through collaborations or otherwise on terms that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. If we are unable to raise adequate additional capital as and when required in the future, we could be forced to cease development activities and terminate our operations, and you could experience a complete loss of your investment.

Previous wording

The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023:

Current wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024:

Previous wording

For the nine months ended September 30, 2023, cash used in operating activities was $8,244,566, attributable to a net loss of $9,836,670, partially offset by non-cash charges of $1,341,880 and a net change in our net operating assets and liabilities of $250,224. Non-cash charges largely consisted of $626,529 in stock-based compensation, $391,683 in depreciation and amortization, $274,158 in right-of-use asset amortization and $44,538 for loss on disposal of assets. The change in our net operating assets and liabilities was primarily due to a decrease in prepaid and other assets of $313,154 and an increase in accounts payable and accrued expenses of $453,847, which were offset partially by increases in inventory of $170,917, accounts receivable of $26,086 and a decrease in lease and other liabilities of $319,774.

Current wording

For the three months ended March 31, 2025, cash used in operating activities was $4,765,214, attributable to a net loss of $5,896,839, partially offset by non-cash charges of $979,503 and a net change in our net operating assets and liabilities of $152,122. Non-cash charges primarily consisted of $367,237 in share-based compensation, $356,699 in amortization of the discount on convertible notes, $132,207 in right-of-use asset amortization and $84,853 in depreciation and amortization. The change in our net operating assets and liabilities was primarily due to a decrease in accounts receivable of $259,775 an increase in accounts payable and accrued expenses of $909,917, partially offset by an increase in inventory of $815,865, a decrease in lease liabilities of $133,076 and increase in prepaid and other assets of $53,523. The Company intends to meet future operating cash requirements through increased sales of commercial products and fundraising, as discussed inFunding requirements.

Previous wording

For the nine months ended September 30, 2024, cash used in operating activities was $14,369,440, attributable to a net loss of $13,692,944 and a net change in our net operating assets and liabilities of $2,503,977, partially offset by non-cash charges of $1,827,481. Non-cash charges primarily consisted of $854,902 in amortization of the discount on convertible notes, $438,601 in right-of-use asset amortization, $310,004 in share-based compensation and $215,144 in depreciation and amortization. The change in our net operating assets and liabilities was primarily due to decreases in accounts payable and accrued expenses of $368,450, lease liabilities of $273,734 and increases in inventory of $1,273,382, prepaid and other assets of $266,518 and accounts receivable of $285,384.

Current wording

For the three months ended March 31, 2024, cash used in operating activities was $4,568,124, attributable to a net loss of $3,599,510 and a net change in our net operating assets and liabilities of $1,529,893, partially offset by non-cash charges of $561,279. Non-cash charges primarily consisted of $258,802 in amortization of the discount on convertible notes, $152,664 in right-of-use amortization, $77,585 in share-based compensation and $71,228 in depreciation and amortization. The change in our net operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $929,992, increases in accounts receivable and prepaid and other assets of $209,982 and inventory of $304,179.

Previous wording

For the nine months ended September 30, 2023, cash used in investing activities for the purchase of property and equipment was $99,018.

Current wording

For the three months ended March 31, 2025, cash used in investing activities for the purchase of property and equipment was $96,605.

Previous wording

For the nine months ended September 30, 2024, cash used in investing activities for the purchase of property and equipment and acquisition of patents was $737,151.

Current wording

For the three months ended March 31, 2024, cash used in investing activities for the purchase of property and equipment and acquisition of patents was $90,160.

Previous wording

For the nine months ended September 30, 2024, cash provided by financing activities was $1,001,724, attributable to proceeds from sales under the at-the-market facility, net of issuance costs and proceeds from the issuance of shares under the ESPP plan.

Current wording

For the three months ended March 31, 2025, cash provided by financing activities was $5,230,266, attributable to proceeds from sales under the at-the-market facility, net of issuance costs.

Previous wording

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing the Annual Report on Form 10-K for the year ended December 31, 2023 as filed on March 28, 2024, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Current wording

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing in the Annual Report on Form 10-K for the year ended December 31, 2024 as filed on March 27, 2025, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Previous wording

Our policy is to recognize revenue when a customer obtains control of the promised goods under Accounting Standards Update (ASU) 2020-05, Revenue from Contracts with Customers (Topic 606), which we adopted effective January 1, 2018. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods, and we have elected to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. We do not have multiple performance obligations in our customer orders, so revenue is recognized upon shipment of our goods based upon contractually stated pricing at standard payment terms ranging from 30 to 60 days. All revenue is recognized point in time and no revenue is recognized over time.

Current wording

Our policy is to recognize revenue when a customer obtains control of the promised goods under Accounting Standards Update (ASU) 2020-05,Revenue from Contracts with Customers (Topic 606), which we adopted effective January 1, 2018. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods, and we have elected to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. We do not have multiple performance obligations in our customer orders, so revenue is recognized upon shipment of our goods based upon contractually stated pricing at standard payment terms ranging from 30 to 60 days. All revenue is recognized at a point in time.

Previous wording

The majority of products sold directly to U.S. customers are shipped via common carrier, and the customer pays for shipping and handling and assumes control Free on Board (FOB) shipping point. Products shipped to our international distributors are in accordance with their respective agreements; however, the shipping terms are generally EX-Works, reflecting that control is assumed by the distributor at the shipping point. Returns are only accepted with prior authorization from the Company. Items to be returned must be in original unopened cartons and are subject to a 30% restocking fee. As of September 30, 2024, we have not had a history of significant returns.

Current wording

The majority of products sold directly to U.S. customers are shipped via common carrier, and the customer pays for shipping and handling and assumes control at Free on Board (FOB) shipping point. Products shipped to our international distributors are in accordance with their respective agreements; however, the shipping terms are generally EX-Works, reflecting that control is assumed by the distributor at the shipping point. Returns are only accepted with prior authorization from the Company. Items to be returned must be in original unopened cartons and are subject to a 30% restocking fee. As of March 31, 2025, we have not had a history of significant returns.